To begin by why accounts are important, a person should first know what accounts actually mean. Accounts are financial records of an organization that register all financial transactions, and must be kept at its principal office or place of business. The purpose of these records is to enable anyone to appraise the organization's current financial position with reasonable accuracy. Firms present their annual accounts in two main parts: the balance sheet, and the income statement (profit and loss account). The annual accounts of a registered or incorporated firm are required by law to disclose a certain amount of information. And have to be certified by an external auditor that they present a 'true and fair view' of the firm's financial affairs.
According to American accounting association, accounting has been defined as, “The process of identifying, measuring, and communicating information to permit judgment and decision by the users.” Yet another definition of American Institute of Certified Public Accountants (AICPA) is that “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character and interpreting the results thereof.
Accounting is very much connected with our personal lives in so far as it is in respect of every business. We all with intent or unknowingly generate accounting ideas in a way when we plan what we will do with money. We need to plan how much money will be spent whilst how much of it will be kept back.
Therefore accounts are important for the following reasons: 1. Accounts include setting budgets for future spending, and we all are familiar with this concept - which is universally acceptable, that money must be spent cautiously. The same is true of a business. It is therefore imperative for a business to know about the inflow and out flow of economic resources and their results. Thus,